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Tax-exempt organizations have a unique set of legal needs and concerns. As one of the most experienced tax-exempt and nonprofit practices in the United States, McDermott provides a wide range of legal services to organizations across the sector, including:
- Nonprofit and governmental hospitals and other tax-exempt health care organizations, such as health maintenance organizations, skilled nursing facilities, home health agencies and their affiliates
- Tax-exempt and governmental colleges and universities
- Trade and professional associations
- Corporate foundations
- Corporate social responsibility and other philanthropy programs
- International philanthropy structures
- Private foundations and other planned-giving vehicles
- Scientific research organizations
- Social impact investors
Nonprofit Business Transactions
Whether you’re dealing with the issues that arise in mergers and acquisitions, conversions and sales, joint ventures, physician practice acquisitions, academic medical center relationships with physicians, or captive insurance arrangements, our breadth of experience and diverse client base make us ideally qualified to represent tax-exempt organizations in specialized industries. In the health care sector, for example, we routinely address both tax-exemption issues and non-tax health care regulatory considerations involved in strategic transactions. And through our history of assisting nonprofit clients through major business changes, we’ve built long-standing credibility with state attorneys general across the United States.
Tax Planning and Compliance
Tax-exempt organizations face complex tax issues, such as planning for appropriate taxation of unrelated business activities and debt-financed income, navigating the applicable private foundation or intermediate sanctions rules, engaging in effective grant making and operating efficient international philanthropic programs. Thanks to our premier health care law practice, we have a wealth of experience working with hospitals and health systems on charity care and community benefit compliance and disclosure. We work to help raise capital in tax-exempt bond financings, assess the impact of operational changes and private business use on existing bonds, and participate in complex joint ventures for Section 501(c)(3) organizations. And we can help large for-profit companies in restructuring philanthropic programs to be as tax-efficient as possible, and in expanding charitable activities beyond the United States.
Nonprofit Executive Compensation
Board review of compensation, board members’ degree of independence, proper reporting of compensation and benefits on Form 990, and the impact of new excise taxes on executive compensation in the wake of tax reform are a few of the things the Internal Revenue Service (IRS) is likely to consider in an audit. We’ll work to identify these and any other potential roadblocks as we assist in the design and implementation of virtually all forms of qualified and non-qualified retirement and welfare benefit plans, as well as taxable and non-taxable fringe benefit programs for employees.
Tax Audits
During federal or state tax audits and examinations, we can offer strategies for defense, dealing with examining agents, obtaining technical advice from the IRS, and the administrative appellate process. With our decades of experience, we represent nonprofit organizations facing proposed revocations of tax-exempt status; terminations or changes of public charity status; and issues regarding employment taxes, Section 501(r) compliance and unrelated business income tax.
Tax Litigation
To best counsel nonprofit hospitals and health systems in inquiries and litigation concerning charity care and community benefit, we use an integrated, multidisciplinary team of tax, trial and health care lawyers. We’ve been involved in some of the most prominent nonprofit law litigation, including the representation of teaching hospitals pursuing refund claims for employment tax (FICA) paid for medical residents, and have extensive litigation experience in federal courts across the United States.
Nonprofit Corporate Governance
With the largest, most comprehensive and sophisticated nonprofit corporate governance practice among US law firms, we offer our deep knowledge and counsel regarding board composition, structure, policies and practices; exercise of fiduciary duty; board and executive compensation; corporate compliance programs; internal investigations; executive leadership succession planning and implementation; governance effectiveness assessments; and implementation of comprehensive conflict of interest programs and other internal controls and procedures.
Charitable Planning
We help clients make critical decisions that affect important personal, business, tax, civic and charitable concerns, and our estate planning lawyers work hand-in-hand with exempt organization lawyers to help philanthropists structure their gifts and run effective charities to create a lasting impact. With extensive experience providing creative, customized solutions to clients’ most sensitive needs and philanthropic goals, our private client and wealth management practice is one of the most highly regarded internationally.
